Music Business

David Lowery Shares Proof Of Flawed NMPA, HFA, Spotify Settlement

18ixbuamiv6k5jpgDavid Lowery shares a check and statement sent from Harry Fox, and explains why it represents deep-rooted flaws within the recent settlement between the Harry Fox Administration, the National Music Publishers Association and Spotify.

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By David Lowery from the Trichordist

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You’re kidding me right?  What is this for? No accounting? No cover letter.  Is this some sort of “bait” check?  How can NMPA/HFA/Spotify settlement possibly be “fair” with this sort of nonsense going on? 

For those not familiar with the nuances of the music licensing business  Harry Fox Agency (HFA)  is s former subsidiary of the National Music Publishers Association (NMPA).  HFA acts as a clearing house for those wishing to obtain mechanical licenses (copy AND distribute) a songwriters work.  So for instance streaming services like Spotify can come to HFA and obtain licenses for many songs, but not all.  It is important to note that HFA can only issue licenses for songwriters/publishers that opt into their service.

So how do streaming services get the licenses from the remaining writers?  Normally they hire a third party to track down the remaining writers and send what are called “Notices of Intent” to exercise a compulsory license.

In the case of Spotify they hired Harry Fox Agency to  perform this task.  Are you following me here?  This means that Harry Fox is on one hand representing songwriters and publishers, but on the other hand they are also representing Spotify. Does this seem like a conflict of interest to anyone?

Now in my case (and virtually every independent songwriter/publisher I surveyed),  they never bothered to send valid “notices of intent” to obtain the licenses for Spotify to use my songs until after the fact (hence the class action against Spotify). In the vernacular: they totally fucked up.

But Harry Fox Agency was also apparently hired to pay royalties and account to songwriters on behalf of Spotify. Have they also fucked this up as well?  Yes. Just look at the check above. Here are just some of the things wrong with this check

  1. What is the check for? Songwriter royalties?  Is it for just being a cool band? Or is it a super sleazy legal trick (cashing a check is sometimes viewed as an implicit license)?
  2. Are they sending out checks like this to other independent publishers? To whom and why?
  3. If it is for songwriting royalties, which tracks? How many spins?
  4. What accounting period does it cover?
  5. How did they arrive at this amount?  If there is no license in effect, there is no royalty rate with which to calculate a royalty?
  6. As they are acting as an agent of Spotify isn’t this an improper Ex-parte communication?
  7. They don’t have a taxpayer ID from me, because there is no contract or license. How do they even know they are paying the proper party?
  8. Where does the 28% withholding tax go?  I’m not a tax expert but this doesn’t seem like the proper procedure.

So HFA is clearly fucked up. But why does this matter?  Because the NMPA/HFA and Spotify all have an interest in stopping the songwriter class action.

  1. The NMPA owned HFA when they began working (and fucking up) on behalf of Spotify. NMPA owned HFA until July of 2015. It is likely that NMPA had to indemnify the new owners of HFA private equity firm Rizvi Traverse. In turn it’s highly likely that HFA had to indemnify Spotify for services (poorly) performed. Thus it’s in NMPAs interest to make this all go away. This is not the same as being in the interest of NMPA’s constituent publishers. Why are constituent publishers being dragged into this?
  2. NMPA/HFA/Spotify settlement leaves HFA in place. Look at the check above!  How can any publisher or songwriter ever have any confidence that they will ever receive a proper accounting? One of the reasons we filed a class action against Spotify was to bring in an independent third party auditor and bring some much needed transparency to the process.

The choice is clear for songwriters and publishers.  A backroom deal between related parties or a transparent court supervised process?

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2 Comments

  1. Didn’t SESAC buy HFA in July 2015? Could this be a strategy to get the Nashvile based PRO out of the pig-in-the-poke obligations they bought into?

  2. I reached the same conclusion and did not opt into their complicit scheme – I stinks to high heaven – and a nice little bonus share for unaffected major publishers. nice – sitting in a undisclosed meeting coming to an undisclosed arrangement that we cannot see. and what does direct quote from the NMPA FAQ imply ?
    “How are Pending and Unmatched Royalties distributed to Participating Publishers?
    Pending and Unmatched Royalties are paid to Participating Publishers in two ways: (i) through the claims
    made through the Claiming Portal and (ii) through the distribution of any royalties that remain unclaimed
    after the Claiming Period.
    (i) Twelve (12) months after the end of each Royalty Period, Spotify will provide
    Participating Publishers with access to a Claiming Portal that will include a list of
    Pending and Unmatched Works for each Royalty Period. Pending and Unmatched
    Works will be prioritized by the amount of associated Pending and Unmatched Royalties.
    Participating Publishers will have the ability to claim ownership of Pending and
    Unmatched Works for three (3) months (the “Claiming Period”). Spotify or a third party
    program administrator (the “Program Administrator”) will then pay Participating
    Publishers Pending and Unmatched Royalties associated with claimed Pending and
    Unmatched Works.
    (ii) After the Claiming Period is over, any Pending and Unmatched Royalties that remain
    unclaimed will become the “Remaining Fund.” Spotify will be allowed to hold ten
    percent of the Remaining Fund for each Royalty Period to address any claims brought by
    non-Participating Publishers (any publisher or songwriter that does not participate in the
    settlement) related to Pending and Unmatched Usage as a “Reserve Fund.”
    (iii) After CPA certification of the Pending and Unmatched Royalties and the Reserve Fund,
    the independent Program Administrator will calculate a market share for each
    Participating Publisher. The market share will be based on known usage on Spotify for
    (i) the two (2) months immediately prior to the opening of the Claiming Period and (ii)
    the last month of the Claiming Period, including any claimed usage identified during the
    Claiming Period. The Program Administrator will then pay to each Participating
    Publisher its market share distribution of the Remaining Fund within three (3) months of
    the close of each Claiming Period.”
    So basically, participating publishers can claim the money they are owed via a portal – but what of participating? Still our money right?
    And further to this, they will divvy up any unclaimed money between the market share major publishers – wicked!!!

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